The World Bank Sri Lanka Strategic Cities Development Project (P130548) REPORT NO.: RES44616 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SRI LANKA STRATEGIC CITIES DEVELOPMENT PROJECT APPROVED ON MAY 5, 2014 TO DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA URBAN, RESILIENCE AND LAND SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Faris H. Hadad-Zervos Regional Director: John A. Roome Practice Manager/Manager: Catalina Marulanda Task Team Leader(s): Thalyta Ernandya Yuwono The World Bank Sri Lanka Strategic Cities Development Project (P130548) ABBREVIATIONS AND ACRONYMS ERD External Resources Department GoSL Government of Sri Lanka IDA International Development Association MUDH Ministry of Urban Development and Housing PDO Project Development Objective PIU Project Implementation Unit PMU Project Management Unit UDA Urban Development Authority The World Bank Sri Lanka Strategic Cities Development Project (P130548) BASIC DATA Product Information Project ID Financing Instrument P130548 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 05-May-2014 31-Dec-2021 Organizations Borrower Responsible Agency Democratic Socialist Republic of Sri Lanka Ministry of Urban Development and Housing Project Development Objective (PDO) Original PDO Improve selected urban services and public urban spaces in the Participating City Regions of Sri Lanka. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-58000 27-May-2016 20-Jul-2016 19-Oct-2016 31-Dec-2021 55.00 11.80 45.24 IDA-54280 05-May-2014 12-Sep-2014 16-Oct-2014 31-Dec-2021 82.00 67.30 .36 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Sri Lanka Strategic Cities Development Project (P130548) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Project Status 1. Project Overview. The US$ 147 million IDA Credit1 for the Strategic Cities Development Project (SCDP) was approved on May 5, 2014. An additional IDA Credit2 of US$ 55 million was approved on May 31, 2016. The Project Development Objective (PDO) is “to improve selected urban services and public open spaces in the participating city regions of Sri Lanka”. The PDO is supported by four Project Components: i) Kandy City Region Urban Interventions; ii) Galle City Region Urban Interventions; iii) Implementation Support; and iv) Jaffna City Region Urban Interventions. The Project is scheduled to close on December 31, 2021. On March 11, 2020, a Level II restructuring of SCDP was approved, which included a partial cancelation of US$ 65 million, and the addition of a Contingent Emergency Response Component (CERC) as Component 5 of the Project. The canceled amount was repurposed for the Kandy Multimodal Transport Terminal Development Project (P172342). Disbursement of the Original Credit (Kandy and Galle) is around 90 percent of the total US$ 67.5 million. The disbursement rate for the Additional Financing Credit (Jaffna) is only 25 percent of the total US$ 47 million. 2. Overview of Project Implementation Status. To date, the total disbursement is US$ 75.1 million, accounting for 60 percent of the total Credit. Of which disbursement from the original credit for Kandy and Galle amounting to US$ 63.3 million, and US$ 11.8 from the additional financing credit for Jaffna. Component 1, Kandy, includes 63 sub-projects and capacity building activities, of which: (i) 51 have been completed; and (ii) 12 are under implementation. Component 2 Galle includes 46 subprojects and capacity building activities, of which: (i) 33 have been completed; (ii) 13 work contracts are currently under implementation. Component 3 finances overall Project management and is under implementation. Component 4 Jaffna includes 51 subprojects and capacity building activities, of which: (i) 34 have been completed: (ii) 6 work contracts are under implementation. Approximately 400,000 people have benefitted from improved basic services delivered in the participating city regions. These range from improving reservoirs, water treatment, distribution, and sludge treatment, to public spaces such as parks and viewing decks, to bus terminals and drainage improvements. Rationale for restructuring 3. Implementation of the Project has been challenging from the onset, particularly compounded by the difficulties of preparing and executing more than 100 civil works and capacity building contracts simultaneously, in three decentralized locations. Weak project and contract management and works supervision have led to significant delays in procurement and implementation, incomplete works, and cancelled sub-projects. The COVID-19 pandemic is further impacting ongoing operations of contractors, who are facing labor shortages and lack of available equipment. The ratings for achieving PDO and Implementation Progress have been Moderately Unsatisfactory since September 2017. 4. On February 2, 2021, the Government of Sri Lanka through the External Resource Department (ERD) requested the partial cancelation of US$ 27 million from the IDA Credit3. The purpose of this partial cancelation is to release the 1 IDA 54280-LK 2 IDA 58000-LK 3 equivalent to SDR 18,712,080 (based on exchange rate on February 19, 2021) The World Bank Sri Lanka Strategic Cities Development Project (P130548) uncommitted balance under Component 4 of the Project, which cannot be disbursed before the Project’s closing date. It is expected that this partial cancelation will allow the Project Implementation Unit (PIU) in Jaffna to focus their attention on managing and supervising ongoing activities and ensure full completion before the project closing date. Proposed Restructuring 5. The proposed restructuring of SCDP involves the partial cancelation of US$ 27 million from the Additional Financing Credit. The canceled amount will be repurposed to Sri Lanka COVID-19 Emergency Response and Health System Preparedness Project Additional Financing. In addition, make adjustment to a few indicators in the Result Framework. Following the restructuring, implementation of SCDP will continue to focus on improving public services in the three cities, consistent with the PDO. 6. There is no pending audit report for the project. II. DESCRIPTION OF PROPOSED CHANGES 7. Responding to the request from the Government of Sri Lanka (GoSL) submitted by External Resource Department (ERD) of Ministry of Finance on February 2, 2021, the proposed amendment to SCDP Financing Agreement will include: i. A partial cancellation of US$ 27 million from the Additional Financing Credit Agreement IDA-58000. The canceled IDA credit from SCDP will be repurposed Sri Lanka COVID-19 Emergency Response and Health System Preparedness Project Additional Financing. ii. The Results Framework will be revised reflect the reduced Project’s scope and to adjust the end target values of some of the indicators based on the partial cancelation of Jaffna Component. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ The World Bank Sri Lanka Strategic Cities Development Project (P130548) PBCs ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation Disburs IDA-54280- ing&Re XDR 47,862,685.00 0.00 19-Feb-2021 47,862,685.00 001 paying BORROWER' IDA-58000- Disburs XDR 39,900,000.00 18,712,080.00 19-Feb-2021 21,187,920.00 S REQUEST 001 ing FOR The World Bank Sri Lanka Strategic Cities Development Project (P130548) COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-58000-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: Gds,Wks,NCS,CS,Trg,IOC 39,900,000.00 6,640,054.91 21,187,920.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Emergency Expenditures 0.00 0.00 0.00 0.00 0.00 Total 39,900,000.00 6,640,054.91 21,187,920.00 . The World Bank Sri Lanka Strategic Cities Development Project (P130548) . Results framework COUNTRY: Sri Lanka Sri Lanka Strategic Cities Development Project Project Development Objectives(s) Improve selected urban services and public urban spaces in the Participating City Regions of Sri Lanka. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 Improved urban services Aggregate number of people benefiting from improved urban services in participating city regions 0.00 134,000.00 570,000.00 (disaggregated by gender) (Number) Percentage of female beneficiaries benefiting from 0.00 51.00 improved basic services across all three cities (Number) Increased urban public spaces New or rehabilitated urban public spaces in participating city regions 0.00 30,000.00 100,000.00 (Square Meter(m2)) PDO Table SPACE The World Bank Sri Lanka Strategic Cities Development Project (P130548) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Kandy City-region Urban Interventions 1.1 Number of silt traps implemented around Kandy 0.00 5.00 5.00 5.00 Lake (Number) 1.2 Length of water transmission and 0.00 15.00 13.00 distribution pipes replaced (Kilometers) 1.3 Length of Underground and surface storm water 0.00 1.00 4.00 drainage rehabilitated (Kilometers) 1.4 Roads rehabilitated, 0.00 10.00 17.00 9.00 Non-rural (Kilometers) 1.5 Number of bus facilities constructed/ rehabilitated 0.00 1.00 3.00 (Number) 1.6 Municipal infrastructure and maintenance program No No No No No Yes developed and adopted in Kandy City Region. (Yes/No) Galle City-region Urban Interventions 2.1 Length of major canals and local drains improved 0.00 5.00 16.00 17.00 under the project (Kilometers) The World Bank Sri Lanka Strategic Cities Development Project (P130548) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 2.2 Number of bridges 0.00 1.00 9.00 rehabilitated (Number) 2.3 Length of new or rehabilitated streets with 0.00 1.00 1.50 3.00 3.00 sidewalks (Kilometers) 2.4 Length of new or rehabilitated ocean 0.00 1.00 1.50 4.07 3.00 pathway (Kilometers) 2.5 Asset Management system with maintenance program for municipal No No No No No Yes infrastructure developed and adopted in Galle City Region (Yes/No) Action: This indicator has been Revised Jaffna City Region Urban Interventions 3.1 Roads rehabilitated, 0.00 25.00 Non-rural (Kilometers) 3.2 Urban walkability enhancements (Square 0.00 10,000.00 Meter(m2)) Action: This indicator has been Marked for Deletion 3.3 Designated cycle lanes 0.00 16.00 (Kilometers) The World Bank Sri Lanka Strategic Cities Development Project (P130548) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Marked for Deletion 3.4 Length of storm water drainage reinstated 0.00 1.63 (Kilometers) Action: This indicator has been Revised 3.5 Number of public conveniences constructed 0.00 6.00 or rehabilitated (Number) 3.6 Completion of strategic plans/ studies in Public Transport and Traffic 0.00 3.00 Management, Drainage and Spatial Development (Number) Action: This indicator has been Revised 3.7 Number of community consultative committees with at least one third of women representative, for 0.00 2.00 pond related activities established as part of the project design and implementation (Number) Action: This indicator has been Revised The World Bank Sri Lanka Strategic Cities Development Project (P130548) IO Table SPACE . The World Bank Sri Lanka Strategic Cities Development Project (P130548)